Updated: Sep 2, 2021
We all know that marketing is an important factor to the success of business, but it’s more important for business to measure the effectiveness of it marketing. A business could create the newest and the most attractive products, but it means nothing if nobody knows about it.
What Does ROI Mean in Digital Marketing?
Return on investment (ROI) is a term used to describe the profitability of an organization’s marketing efforts. Typically, marketing ROI is used to justify marketing spend and budget allocation for ongoing and future campaigns and initiatives. Determining ROI in digital marketing is about tracking the various channels that comprise your overall digital marketing strategies.
How Do You Calculate Marketing ROI?
Return on investment simply compares the profit that resulted from a digital marketing campaign to how much the campaign cost to be created and deployed. We will introduce a simple method to calculate ROI. The basic ROI calculation is straightforward: ROI = (Net Profit/Total Cost)*100
- Net profit: company's profit, which is equal to total revenue — total expenses
- Total Cost: all the costs you spent ( miscellaneous costs, utilities cost, delivery, etc..)
Let’s look at a sample here: you invest $100 in a pay-per-click advertising program. After getting the revenue subtract the cost you spent on ads. Let's say this the revenue increase of $1,000. To see your return per dollar spent, divide your revenue increase by the cost of the campaign. In this example, your ROI is 10-to-1: You brought in an extra $10 in revenue for every $1 you spent on marketing.